Air New Zealand drops price-fixing challenge

Wednesday, June 05, 2013

Air New Zealand has dropped its challenge against the New Zealand Commerce Commission and will plead guilty to price-fixing charges.
The carrier had kept up its case while, over time, 10 carriers involved in the commerce commission’s investigation, which began in December 2008, pleaded guilty to fixing prices and surcharges on cargo shipments to the country. Most recently, Cathay Pacific Airways, Thai Airways and MASkargo admitted fault, paying $9.6 million in total for their crimes. The commission dropped its proceedings against United Airlines and PT Garuda Indonesia, two of the original 13 carriers charged with cartel behavior, last year.
"Air New Zealand has withdrawn its proceeding challenging the settlement agreement in the air cargo proceeding and will pay costs to the commission in relation to the settlement of this dispute,” according to a joint statement by the carrier and the commission. “The parties have agreed a basis for settling the proceedings. There will now be a penalty hearing and the parties are seeking the earliest available date for that hearing. The parties will make no further comment until then."
When the initial charges against the 13 carriers were announced nearly five years ago, Paula Rebstock, who served as the commission chair during that time, set anti-cartel enforcement as a top priority.
"Participation in cartel activity is internationally regarded as one of the most egregious forms of anti-competitive behavior,” Rebstock said at the time. “It results in consumers and businesses paying higher prices and having less choice than if competitors were competing honestly. Cartels have grown on a worldwide basis and often operate at a global level. Importantly, cartels undermine New Zealand's international competitiveness."
Price-fixing is a violation of section 30 of New Zealand’s Commerce Act. Violations carry a fine of up to $10 million.
Cartel activity among cargo-related entities hasn’t been limited to New Zealand or even to the carriers themselves. In March 2012, the European Commission slapped a 169 million euro fine ($220.9 million) on 14 freight forwarding companies for participating in cartel activity between 2002 and 2007. The U.S. Department of Justice, which generated nearly $2 billion in fines during its investigation into price-fixing among carriers, also targeted and convicted freight forwarders.
Fines and plea deals concerning price-fixing have generally slowed to a trickle in recent months, with the Air New Zealand case standing as the biggest unresolved action currently on the books. Three years ago, however, it seemed as if carriers were pleading guilty and accepting large fines on a weekly basis. The DOJ, itself, ended up with fines from more than 20 airlines and prison terms for a similar number of airline executives during its extensive investigation. - Jon Ross